South Korea’s imports of Iranian crude oil fell nearly 40 percent in May from a year earlier, reflecting Seoul's efforts to reduce purchases in return for a waiver from U.S. sanctions targeting Iran’s controversial nuclear program.

The north Asian nation, currently the world’s No.4 buyer of Iranian crude, could also see imports suspended from July due to a European insurance embargo on Iranian oil shipments.

South Korea imported 3.96 million barrels of Iranian crude in May, or 127,880 barrels per day (bpd), compared with its combined term-agreements to import 200,000 bpd this year.

It imported 29.22 million barrels from Iran during the first five months of the year, down almost 16 percent from a year ago, data from the state-run Korea National Oil Corp showed.

The United States earlier this month extended exemptions from its tough, new sanctions on Iran's oil trade to seven more economies including South Korea.

Of South Korea’s four refiners, only SK Energy and Hyundai Oilbank import Iranian crude. Sources said both refiners will stop importing from Iran when the EU insurance embargo takes effect from July 1.

“It is impossible to choose Iranian crude under the EU insurance embargo,” said a Seoul-based refining source who declined to be named because of the sensitivity of the issue.

The United States and the European Union accuse Iran of trying to build nuclear weapons. Tehran says the program is strictly for civilian purposes.

South Korea imported almost 60 percent more crude from Iran in April than in March, and also 42 percent more than the same month a year ago, pushing purchases to their highest this year and reversing a decline that began in January.

Some analysts said South Korea was stockpiling crude ahead of the EU shipping insurance ban, which would make it extremely difficult to ship Iranian oil.

South Korea’s May import of Iranian crude oil were down 47.3 percent from April.

To plug the Iranian supply cuts, South Korea has turned to other Middle Eastern producers, including the world's top exporter Saudi Arabia, the United Arab Emirates (UAE), Kuwait and Qatar.

Shipments from Kuwait in the first five months rose 23.3 percent to 348,493 bpd, while those from Saudi Arabia rose 7.9 percent to 838,678 bpd. Imports from the UAE increased 8.6 percent to 258,263 bpd, the KNOC data showed.

January-May imports from Qatar rose 14.3 percent to 280,829 bpd.

“The cost of Iranian crude oil is relatively cheap so it will have a small impact on refiners' results although there won’t be a problem sourcing supplies from other countries,” said Baek Young-chan, analyst at Hyundai Securities Co Ltd, said.

Unlike Japan, South Korea is not considering providing sovereign guarantees to insure Iranian oil shipments and get round the EU embargo, according to government sources with direct knowledge of the matter.

South Korea has, however, imposed curbs on exports of goods to Iran to reduce the risks of payment defaults.